All deeds—noble or evil—will be revealed at some point. This is how the wheels of justice grind, when the good is rewarded and the bad condemned. For Uniwide Group founder Jimmy Gow and the company’s current president, Dr. Jesus L. Arranza, the quest for justice has begun, their crusade bolstered by recently unearthed official documents that hint at something sinister behind the fall of the No. 1 retail chain in the country in just one year—in 1997, when all its assets valued at P30 billion were wiped out and its value of stocks falling to below P1 from more than P7 apiece. Even the Ecology Bank, which was majority owned by Gow with 35 branches, was taken by a creditor bank without paying a single centavo.
That the Uniwide Holdings Inc. (UHI) financial advisor and chief financial officer were preparing to put the company under receivership in 1998, leading to the firm’s liquidation years later, remained a mystery to those who witnessed its grandeur.
Gow, after repeatedly reading and analyzing official documents related to the company that were released after a trial court ordered UHI’s liquidation in 2016, couldn’t help but come to the realization that—probably—Uniwide and its 27,000 stockholders were a victim of organized fraud.
“I couldn’t help but ask myself, ‘was there a conspiracy among the people I trust—my banker, my financial advisor, my chief financial officer, my auditor, my lawyer, and those that the company had dealings with?’ Worse, the way the supposed rehabilitation of Uniwide was conducted and regulated, I think the design was more to liquidate than to help the company get back on its feet,” Gow stressed.
It is worth noting that Uniwide Sales Warehouse Club reached its peak in net sales at P14.7 billion in 1997 and was the undisputed go-to outlet of sari-sari (small community) stores.
Uniwide Holdings, on the other hand, just received a fresh P4.3-billion funding from its initial public offering (IPO) in August 1996.
However, Gow recalled that in 1998, his chief financial officer Jaime I. Cagangis and financial advisor Equitable Bank led by George Go and Cesar Buenaventura, were already preparing to put Uniwide Holdings under receivership.
“These are the issues that I want to be clarified–how come Uniwide Holdings, which just got P4.3 billion in IPO proceeds in 1996 (the money supposedly deposited at Equitable Bank) and had no debts, was being placed under receivership already one year later? Remember, it was Uniwide Warehouse Club which had debts, and it was a separate company from Uniwide Holdings,” Gow emphasized.
Also, Gow wondered why all these companies were included: Uniwide Sales Inc., Naic Resources and Development Corp., First Paragon Corp. and Uniwide Warehouse Club Inc.
The Securities and Exchange Commission (SEC), meanwhile, appeared to have been remiss of its duties, Gow noted, as the regulator did not even carefully check the records, especially the necessary approvals from Uniwide Holdings Board of Directors and its 27,000 stockholders. “There were no records on the stockholders’ approval on everything that happened.”
As a matter of fact, then-SEC Chairman Perfecto Yasay approved it in just a week. “The speed to which it was approved was amazingly fast.”
Like no other
Uniwide Sales Warehouse Club, in its prime, was unmatched in terms of store sizes (minimum of 1 hectare per store), number of customers, checkout counters (around 60 per store), inventory and sales.
Uniwide was a household name back then, much like today’s Puregold, Shopwise, SM and Robinsons Supermarkets — almost everyone was in Uniwide because goods ranging from plates to canned goods to fresh meat, fish and fruits were more affordable versus competitors.
The warehouse club was so popular that in 1988, Uniwide had to initiate measures to somehow limit the traffic in some of its stores during its annual promotional season. It was even criticized in the media one time in 1991, when it held a midnight sale that lasted up to 4 a.m. because it caused major traffic jams in Metro Manila.
According to the Rehabilitation Plan prepared by Buenaventura Filamor Echauz (BFE), the Uniwide Group employed around 3,560 people, and its operations concentrated in Metro Manila, Laguna, Cavite and Tarlac.
It already had 11 stores in 1991 and was so in-demand that banks saw the potential of doing business with the company, and lent the firm money without collateral.
Its operations then was simple, there was Gow the owner, Efren Yap as general manager, a few store managers, and thousands of employees. Its transactions with suppliers were heavily based on cash.
With gross sales reaching between P15 billion and P20 billion annually in the 1990s, Gow decided that it was time to expand its business and add more stores in the Philippines to further cement the company’s leadership in the retail space. He also started buying properties because he was getting good deals, as he was always ready to pay in cash.
“In 1992, Cabangis, who was then at SGV as partner, approached me and told me to make Uniwide a listed company. He told me that he can raise more than P4 billion in the listing proceedings, and that he will resign from SGV to lead the company as CFO, provided that I pay him P5 million a year,” Gow said in a mix of English and Filipino.
Gow agreed, seeing the potential that P4 billion of fresh capital can create for such a popular company among Filipinos.
Thus, Uniwide Holdings was incorporated. Cabangis, who showed genuine concern and interest to help the company grow, was placed at the helm. He brought in about 100 people, including the comptroller, vice president for finance, asset manager and board of directors.
UHI, according to BFE, served as the holding company for the real estate and franchising operations of the Uniwide Group. The retailing operations, on the other hand, were with the Uniwide Sales Warehouse Club Inc. (USWCI), which is 100-percent owned by the Gow Family. UHI’s Board of Directors included Gow and his daughter Cherrie, Cabangis, Dr. Bernardo M. Villegas and Cesar Virata. UHI was incorporated on Sept. 15, 1994, initially with an authorized common stock worth P500 million, which was later raised to P5 billion at a par value of P1 apiece.
There were 27,000 investors that subscribed to the UHI’s IPO in 1996, raising P4.3 billion in new capital. Stocks were offered at P4.80 apiece, and then quickly rose to the P5-level. Only 35 percent of the total outstanding shares was floated to the public, with the rest still held by the Gow Family-controlled companies, including Uniwide Sales Inc. (USI), which owned approximately 50 percent of UHI. Gow personally owned 2 percent of UHI.
Proceeds from the IPO were deposited in Equitable Bank, Gow said.
The BFE report showed that the Uniwide Group’s assets as of May 31, 1999 were valued at P19.9 billion, while current liabilities, loans payable and other liabilities only amounted to P11.1 billion. In that period, Uniwide’s bank debts totaled around P6.95 billion.
“The firm thus had adequate assets to cover liabilities,” the BFE noted.
But BFE said Uniwide’s performance was affected by the Asian financial crisis. In the first five months of 1999, it had a net operating loss of P383 million on total revenues of P2.7 billion. The financial advisor noted that this was due to low sales volume and reduced franchise fees and rents.
Gow, however, stressed that what really caused the big drop in sales was the considerably low store inventory, reportedly due to the decision of Cabangis to stop paying the suppliers properly.
Arranza, who was a long-time supplier of coconut oil to Uniwide outlets, recalled that he was invited to a meeting among the worried suppliers.
Arranza said majority of the suppliers started to cut their deliveries to Uniwide because they were no longer being paid the same way the company was settling its dues before the crisis.
The suppliers decided then that they will only make another delivery to Uniwide stores once the previous delivery has been fully paid.
This meant that the worry was only on the matter of cash flow and not insolvency.
Gow said he could not understand why Cabangis allowed this to happen when Uniwide was still generating enough sales. Also, the proceeds from the IPO were in the bank.
According to the report of SGV, the IPO proceeds were deposited in a custodian bank it did not name. Gow surmised that this custodian bank was probably Equitable Bank, as he had been dealing with the financial institution for 35 years already at that time. Also, all the money that was pouring in from the IPO was being deposited to Equitable.
Conspicuously, the IPO proceeds deposited in this custodian bank just disappeared in Uniwide’s financial books in 1997. This was also evident in the audit prepared by SGV submitted to the SEC in April 1998.
Gow said Cabangis could have easily solved the liquidity shortfall, which, BFE noted, was impeding the Uniwide Group’s day-to-day operations that time.
Behind the scenes, Gow said Cabangis, his financial advisors Go and Buenaventura, and the creditor banks were already making deals. Whereas before the banks were happily dangling loans to Uniwide without collateral, they started to demand something to cover the new loans and debts accumulated by the company over time.
This was when the banks started getting Uniwide properties and shareholdings.
Gow cited the case of Land Bank of the Philippines. Gow narrated that Cabangis allowed Land Bank to get P3.8 billion worth of assets and shares of stocks for Uniwide’s P500-million debts.
“All banks got this similar deal, they got my properties as collateral; all these without my knowledge. Even my board of directors did not know this. Bernie Villegas, a member of the board, admitted this to me, and without the stockholders’ knowledge; nobody knew,” Gow said.
Equitable Bank (EBC), meanwhile, acquired his Ecology Bank that had 35 branches that time, Gow added. Uniwide owed EBC P1.73 billion. Gow said EBC did not even assign a single centavo value for the Ecology Bank. It also secured leasehold rights on several properties and the Uniwide Family Store.
Gow said Equitable had full knowledge of Uniwide’s assets because Cabangis made Go and Buenaventura the financial advisors of the company.
BFE’s rehab plan stated that Uniwide also owed these financial institutions: RCBC (P1.34 billion), UCPB (P995.5 million), PNB (P772 million), BPI (P610 million), International Exchange Bank (P100 million), Allied Bank (P262.5 million), ING (P100 million), Asian Bank (P200 million), East West (P100 million), East Asia (P44.59 million), Metrobank (P53.5 million), PB Com (P48.5 million).
Gow recalled that in 1997, Cabangis went to ING Barring and planned another road show to raise more money, just like what they did in 1996 when they offered shares of Uniwide holdings in Europe, the US and other areas.
“They were given more than P1 billion worth of shares at P5.80 apiece to be re-sold again. We had a buy-back agreement at P6.30 per share. But the market price of the shares later went up to P7.50. Then after three weeks, Cabangis, ING Barring, Asian Alliance, PCCI Financial, PNB Leasing, around 6 or 7 groups, with collective shares worth more or less P1 billion, sold their shares.”
“When they sold, it triggered a negative reaction in the market because of the sudden unloading of shares. The stock prices plunged to below P1 in less than six months; this was the market reaction.”
“These are the people who knew what was going on in the company; they knew that the assets of Uniwide were already given to the banks as collateral and that this company would have a cash flow problem,” Gow narrated.
So in just a year after Uniwide Holding’s IPO, the company went bankrupt despite having P4.3 billion deposited in a custodian bank, which was believed to be Equitable Bank, and about P30 billion in pooled assets, according to the audit prepared by SGV.
“Everything happened in just one year–in 1997. All the assets were given to the banks, the P4.3 billion in the custodian bank banished, and the value of the stocks fell below P1 per share. So in 1998, Cabangis and my financial advisors were already applying for receivership. And the SEC, which was supposed to take care of registered companies, did not even look into all these, especially since Uniwide had so much money and assets,” Gow stressed.
The Walmart deal
Months before the IPO, Cabangis and his boss at SGV, Washington Sycip, went to Gow and offered to bring in international brand Walmart as an investor of Uniwide.
Gow said Walmart was to invest P6 billion and was supposed to acquire six Uniwide buildings and lots. SGV was supposed to get a 3-percent commission from the deal.
For three days, they were drafting the contract at Shangri-la Makati. Suddenly, however, Walmart representatives decided to drop the deal at the end of the third day, apparently due to the onset of the financial crisis.
The rehab plans
The primary objective of the original rehabilitation plan, according to an SEC document, was “to ensure the servicing and eventual full payment of all petitioners’ (Uniwide Group) debts by stabilizing their operations and for them to prepare and take advantage of future opportunities for growth with the support of all parties; and that given the necessary breathing space with the support of their creditor banks, petitioners have the reason to be confident that they will be able to meet their obligations in due time.”
The rehab plan, submitted to the SEC in October 1999, had 15 action plans, including the return of Uniwide to its core business of retailing and restructuring of all loans.
On March 6, 2000, the receivership committee composed of Monico V. Jacob, chairman, and members Cornelio T. Peralta and Arthur N. Aguilar, presented the first amendment to the rehab plan, highlighted by the entry of French retailer Casino Guichard-Perachon, which committed to invest P3.57 billion. The amendment “calls for the total repayment of all loans via a combination of dacion en pago and cash payment at a discount.”
Cabangis and the three-man SEC-appointed team handling the rehab of Uniwide managed to secure a 20-percent discount from the creditors. They will be paid through the dacion of the Uniwide assets and the money to be invested by Casino. The total debt that needed to be paid that time was reduced to only P9 billion because of the 20-percent discount that the creditors granted. Then-SEC Chair Lilia Bautista approved the plan on April 11, 2000.
In that decision, the SEC noted that “the audit by the Cunanan auditors showed that the Gow Family did not take out funds from the Uniwide Group of Companies for their personal use.”
Gow said it was supposed to be a done deal already. But in January 2001, Casino suddenly left, even leaving behind around P60 million in cash advances.
On October 11, 2001, the receivership committee sought SEC’s approval for the second amendment to the rehab plan, which apparently dealt the more telling blows to Uniwide. It was approved by the corporate regulator a year later.
This time, however, they allowed the banks to raise the original debts by 20 percent. This, according to Arranza, effectively increased the value of Uniwide debts by 40 percent, considering the creditors have earlier agreed to grant a 20-percent discount when the first rehab plan was worked out.
“Aside from the additional 40 percent, Gow was made to shoulder all the costs to implement the dacion en pago,” Arranza said.
“We were left without a choice, because the SEC appointed committee/ receivers were calling the shots. This was also the view of our lawyers then,” Gow said.
In the midst of all these, Gow said the members of the receivership committee even wrote a letter to him asking for a 2-percent success commission.
Gow lamented how everything went so fast, when one by one his properties were taken by the banks under a dacion en pago scheme.
“In 2003, BPI took my building in Libis, where our operations were headquartered,” he said. “The bank appraised the building at less than P400 million, but it is a two-hectare property with a multi-storey building whose fair market value was at P800 million.”
He also complained how the banks appraised his properties at “unconscionably low” values, such as the iconic Good Earth in Avenida, whose value was pegged by a bank at only P300 million; a commercial lot near Corinthian Garden, whose value was slashed by half to only P30,000 per square meter; and a 70-hecatre lot in Naic, Cavite along Manila Bay, whose value was only appraised at P280 per square meter.
“I believe what they did may be construed as a fraudulent act,” he said.
What the documents say
Gow, who gave Cabangis his full trust in running Uniwide, didn’t know what hit him, until he saw the documents released by a court in 2016.
“We only learned of these documents and obtained copies when the SEC forwarded the Uniwide files to the Paranaque RTC to implement the liquidation of Uniwide holdings on August 23, 2016.”
Note that before this, all records of Uniwide could not be located because of the series of transfers of corporate headquarters– including the company files– under the auspices of Cabangis since July 2003.
“I was thinking that maybe that was the strategy of Cabangis — he’d put down the company completely,” Gow said. “Looking back, I think all these happened because of my decision to trust Cabangis.”
Interestingly, according to the documents, the dacion en pago scheme, the 20-percent premium given to the bank debts, and the cost of implementing the dacion (including the capital gains tax equivalent to 6 percent of the transfer value) assigned to Gow, obliterated Uniwide’s assets, effectively liquidating it, instead of rehabilitating it.
The appraised values of the dacioned properties were even balanced against the debts, dacion expenses and 20-percent premium. In the case of RCBC, for example, the receivers valued six Uniwide properties at P1,556,360,059.32 aggregate. The application of payment, on the other hand, showed debt repayment (principal and interest) as of June 30, 1999 at P1,242,494,369; the funding for dacion expenses at P63,366,816.52; and premium on dacioned properties at P248,498,873.80, for a total of P1,556,360,059.32.
“I’m still trying to figure out how a seasoned financial man like Cabangis did not seem to have notice these infirmities,” Arranza said.
The SEC, on the other hand, did not even bother to scrutinize everything, Gow noted.
In 2011, Gow said claims from Uniwide’s unsecured creditors have dropped to about P400 million. This further dwindled to only about P20 million in 2016.
In 2013, the SEC ordered the liquidation of Uniwide Holdings assets, noting that it can no longer be revived, as its debts were too huge while it had minimal operations already.
Uniwide disputed the SEC order, and elevated the case to the higher court.
Uniwide’s seven stores were closed, and the merchandise were transferred to the Uniwide Coastal Mall.
However, in October 2014, Metropolitan Trial Court Judge Ramsay Pichay ruled in favor of the ejectment case filed by the Manila Bay Development Corp. (MBDC). The court padlocked the Coastal Mall then had the goods and equipment inside it auctioned off. Gow said in an unannounced auction, MBDC won the bid for only P30 million, when clearly the value of the goods seized would have easily exceeded P1 billion.
For one year, Gow said HMR was taking out the items inside Coastal, and it took an equivalent of about 1,600 10-wheeler trucks to complete. “So if you value per truck at P1 million, the total value would easily be P1.6 billion.”
This amount, Gow added, should be enough to cover the P1.6-billion debt payment being demanded by Allied Bank and PNB Leasing, which are seeking to acquire the MetroMall building in Paranaque.
But Gow said MetroMall is owned by Uniwide Holdings, while the P1.6 billion is owed by Uniwide Sales Warehouse Club.
The Coastal Mall, meanwhile, was built using money from the retail sales. Gow recalled that in just one year, Cabangis already spent P1.7 billion for the construction. “He even advanced P300 million to the suppliers and contractors that he picked himself,” Gow said.
Quest for justice
Today, Gow and Arranza are taking steps to rectify what they believe as the wrongs committed by the SEC appointed committee, Cabangis, the banks, his financial advisor and lawyers, with the hope that the truth will come out and the public will know what really happened to Uniwide.
Gow said getting back some of his properties or receiving compensation from the “low valuation” of his assets would just be a gravy—because he is really after getting justice.